The details of the January Producer Price Index showed a further surge in prices of raw materials. Breakeven inflation rates (the yield spread between inflation-adjusted Treasuries and fixed-rate Treasuries) have continued to move higher.
For a variety of reasons, many investors are worried about higher inflation. While we may see reflation (a pickup in prices that were restrained due to the pandemic), a significant increase in underlying inflation appears unlikely.
The U.S. economy lost 2.77 million jobs in the initial estimate for January, which is on par with what we saw a year ago (-2.79 million). Seasonally adjusted, this was recorded as a 49,000 gain (with private-sector payrolls up just 6,000).
With the previous week’s short-squeeze headlines behind us, investors remained optimistic about a fiscal support package, which passed the Senate by a vote of 51-50, with Vice President Harris breaking the tie.
Real GDP rose at a 4.0% annual rate in the advance estimate for 4Q20, a much more moderate pace of recovery than was seen in the third quarter. Details were mixed, but consumer spending showed a significant loss of momentum and monthly figures reflected weakness in November and December.
As expected, the new administration has hit the ground running. In his first two days in office, President Biden issued executive orders which rescinded a number of previous directives or were aimed at ending the pandemic and easing the pandemic’s economic impact.
Judging by recent phone calls and email queries, inflation is a serious concern among investors this year.
For stock market participants, weak economic data has often been taken as a positive, since that implies more fiscal stimulus. However, investors have grown more concerned about possible stumbling blocks. Democratic majorities in the House and Senate are very narrow, some lawmakers are worried about running up the debt, and the window for bipartisan agreement may be short.
The December Employment Report reflected an impact from the pandemic surge and further job losses in state and local government, but wasn’t bad otherwise.
Raymond James Chief Economist Dr. Scott Brown reflects on the trials and tribulations of 2020 and discusses his outlook for the new year.
The holiday shopping season is critical for most retailers. For some, the season is make or break for the whole year. The November retail sales report was weaker than expected, although amplified by the seasonal adjustment. No surprise, consumers are increasingly shopping online.
The news on vaccines has boosted optimism for the economy for 2021. In contrast, near-term developments have been unfavorable. COVID-19 cases have surged and in all likelihood will rise further in upcoming weeks.
The November Employment Reports was a bit disappointing. Nonfarm payrolls rose by 245,000 (vs. a median forecast of 485,000). The increase was held back by the loss of 93,000 temporary census workers.
Chief Economist Scott Brown discusses current economic conditions.
Election results (a divided Washington) and good news on a potential vaccine boosted share prices, although there were some concerns about surging COVID-19 cases (163,402 reported on November 12) and possible difficulties in distributing the vaccine.
Recent data reports have been consistent with a further rebound in economic activity, but we still have a long way to get back to where we were before the pandemic and the pace of improvement has moderated.
The market through October continued to make the case for a steady approach to investing, especially as this is a historically volatile time – the months surrounding a U.S. presidential election – amid a historic, complicated year.
There are a number of uncertainties heading into the November 4 election and many more as we look ahead into 2021. There’s a long held belief that the stock market abhors uncertainty. There’s also an old adage that says the market often climbs a wall of worry.
By now, it should be clear that COVID-19 is not going to go away anytime soon. Consumers and businesses are getting used to living and working under the pandemic and some changes, such as the tendency to work from home, will likely be long-lasting. The economy is always evolving. However, rapid changes can be destabilizing. There will be a number of challenges in the new year.
Job losses in the early stages of the pandemic were more concentrated among low-wage workers. About half of those jobs have come back. For high-wage workers, who have been more able to work from home, job losses were less severe and have rebounded much better.
Nonfarm payrolls continued to recover in September, although the pace of improvement has slowed and we are unlikely to return to February levels until the pandemic is well behind us. The impact of COVID-19 has been uneven, with job losses remaining more severe in lower-paying service industries. Consumer spending has improved, though mixed across sectors. Further fiscal support will be critical for the unemployed.
Many factors feed into the relative strength or weakness of the U.S. economy, but the president traditionally receives the credit or blame. Fiscal policy – taxes and government spending – have an important role in economic activity, and confidence can drive consumer spending and business investment decisions.
Despite a September slump, the S&P 500 and NASDAQ wrapped up the third quarter with gains of 8.47% and 11%, respectively.
The first of three presidential debates is set for the evening of September 29. The topics, chosen by the Chris Wallace, the moderator, will be the Trump and Biden records, the Supreme Court, COVID-19, the economy, racial tensions, and election integrity.
The death of Supreme Court Justice Ruth Bader Ginsburg ignited a fight over her replacement. The increased animosity in Washington lowered the odds that lawmakers will reach agreement on a further fiscal support package and dampened investor sentiment.
The Dow Jones Industrial dipped almost 3% on Monday, and the S&P 500 slid more than 2% from the previous week, off about 7% from its recent highs earlier this month.
There were no significant surprises following the September 15-16 Federal Open Market Committee meeting. As expected, short-term interest rates were left unchanged and the FOMC did not alter its asset purchase plans.
The major stock market indices were choppy on a day-to-day basis, as investors continued to reevaluate the rally off the lows. The economic data reports were inconsequential.
Private–sector payrolls rose by 1.027 million in the initial estimate for August. Normally, such a gain would be considered outstanding. However, in this recovery, that comes as a disappointment.
Led by technology and large-cap companies, the S&P 500 is on pace to post its best summer performance in over 80 years.
The Fed updated its monetary policy framework, moving to a flexible average inflation target. That means that the central bank will target an average inflation rate of 2% (as measured by the PCE Price Index) over time.
In the minutes of the July 28-29 FOMC meeting, participants expected no change in policy rates anytime soon, but officials saw a need for more clarity regarding the likely path, such as adopting output-based forward guidance.
Initial claims for unemployment benefits fell below one million for the first time since mid-March (20 weeks). However, unadjusted claims had already dipped below that level a week earlier. Unadjusted claims totaled 831,000.
The overall economic outlook depends on the virus, efforts to contain it, and the degree of fiscal support. We’ve had a sharp- but-partial rebound in May and June, following a steep decline in March and April. The pace of improvement is expected to moderate. The impact of the pandemic has not been felt evenly.
Nonfarm payrolls rose about as expected in the initial estimate for July, even as economists’ forecasts were widespread and risks to their job outlooks were generally seen to the downside. The unemployment rate fell a bit more than anticipated, but labor force participation stalled.
Real GDP was reported to have fallen at a 32.9% annual rate in 2Q20. Nobody should have been surprised by that. Component data had already indicated massive and broad-based weakness and most economists’ estimates fell in the -30% to -35% range. News reports had generally implied that the downturn was ongoing. That’s clearly not that case...
The Federal Open Market Committee (FOMC) is expected to leave monetary policy unchanged. Officials won’t release revised economic projections until the mid-September FOMC meeting, but Chair Powell will provide an assessment of current economic conditions in his post-meeting press conference.
The pandemic had a significant impact on household spending in March and April, with a sharp contraction in consumer services (basically anything where people come into close contact with each other). The relaxation of social distancing guidelines has contributed to a sharp-but-partial rebound in May and June.
The economic calendar was thin. Investors remained concerned about rising cases of COVID-19. A return to a full lockdown appears unlikely, but the pace of improvement in the economy is expected to slow.
The U.S. Treasury is expected to announce a June budget shortfall of about $863 billion, bringing the 12-month total to nearly $3 trillion (or about 14% of pre-pandemic GDP). The red ink will continue. Lawmakers are expected to approve another round of federal stimulus later this month. None of that is worth losing sleep over.
The June job market report and other indicators remained consistent with an unprecedented steep drop in economic activity in March and April, followed by a sharp-but-partial rebound in May and June. Many of these data were collected before the recent surge in COVID-19 cases.
It’s all about the pandemic. Rising cases in a number of states fueled fears of a second wave of infections and a more protracted economic recovery.
The initial economic rebound seen in recent weeks won’t bring us back to pre-pandemic levels, explains Chief Economist Scott Brown. “A full recovery will take time.”
Efforts to contain the coronavirus have had a major impact on the global economy. There is still a lot of uncertainty in the outlook, which has three elements. First, there was a sharp decline U.S. Gross Domestic Product in 2Q20. Second, there was a sharp-but-partial rebound off the lows in May. Third, improvement after the initial rebound will slow, barring a vaccine or effective treatment for COVID-19...
In her recent book, “The Deficit Myth,” Stephanie Kelton, a professor at Stony Brook University, writes about many of the common misperceptions surrounding government debt and deficits.
The National Bureau of Economic Research (NBER) has formally declared that a recession began in February. The expansion lasted 128 months, the longest on record (at least back to 1854). Economic data reports should suggest that the downturn may have ended in April. That doesn’t mean everything is okay.
Equities suffered a heavy single-day decline amid rising jobless claims and continued coronavirus concerns.
Stock market participants remained optimistic about the economy, further encouraged by a surprisingly strong employment report for May. Bond yields moved above their recent range.
In contrast to expectations of further deterioration, the May Employment Report suggested significant improvement in labor market conditions. No doubt, the economy has turned the corner as states have re-opened.
